Donald Trump, real estate mogul and ersatz Republican presidential candidate, is not one for in-depth policy prescriptions. The entertainer’s campaign website lacks an “issues” section, and he often blanches when pressed to elaborate on a grandiose pronouncement.
But there is at least one issue about which Trump has offered more details than most actual presidential candidates: Federal Reserve monetary policy.
When asked to name his model Federal Reserve chair on Bloomberg’s TV talk show, “With All Due Respect,” on Tuesday, Trump said it’s former Chairman Paul Volcker.
“I liked Paul Volcker a lot,” Trump told hosts Mark Halperin and John Heilemann during the segment, which can be viewed below. “I thought he was a terrific guy in so many different ways, and he had a good pulse and … he was doing what had to be done.”
Volcker, who ran the Fed from 1979 to 1987, increased interest rates dramatically to combat high inflation. He is credited with reducing inflation from 13.3 percent in 1979 to 3.2 percent in 1983 — but in so doing, he induced a recession.
Trump said that his praise for Volcker reflects his own hawkish monetary policy, and expressed more concern about inflation than full employment. He said that while the current near-zero Fed interest rates benefit him as a businessman, they should be raised to avoid an asset bubble.
From a business standpoint, “I like low interest rates,” Trump said. Yet he added that “from the country’s standpoint, I’m just not sure it’s a very good thing, because I really do believe we’re creating a bubble.”
Former Federal Reserve Chairman Paul Volcker has elicited praise from Donald Trump. | Credit: Monica Schipper via Getty Images
Agree or disagree with Trump’s remarks, the actual presidential candidates in either party have rarely provided such a window into their views of Federal Reserve monetary policy. Only one Republican hopeful, New Jersey Gov. Chris Christie, has been as explicit as Trump. Echoing Trump’s concerns about an asset bubble, Christie condemned the central bank in June for its “easy money” policies.
Though former Texas Gov. Rick Perry (R) gained notoriety in 2011 for calling then-Fed Chair Ben Bernanke’s monetary stimulus policies “treasonous,” he has not commented on the topic since then. Sen. Rand Paul (R-Ky.) is calling for the Fed to be audited and stripped of its regulatory authority, but has not explicitly addressed the Fed’s monetary policy.
On the Democratic side, former Secretary of State Hillary Clinton did not mention the Federal Reserve in her otherwise policy-laden inaugural campaign speech in New York City on June 13. Former Maryland Gov. Martin O’Malley (D) and Sen. Bernie Sanders (I-Vt.) have said that the Fed should be held more accountable in its regulation of, and relations with, big banks, but have not laid out their positions on monetary policy, either.
The Huffington Post reached out to all of the campaigns mentioned above for comment, but did not immediately receive any responses.
Republican presidential candidate and New Jersey Gov. Chris Christie has argued that the Federal Reserve’s monetary policies are too dovish. | Credit: Scott Olson via Getty Images
Some economists and financiers share Trump’s fears about an asset bubble, believing that by enabling cheap credit for so long, the Fed is inflating a stock market bubble.
Trump’s association with this school of thought, however, appears to conflict with his professed commitment to economic growth. Raising rates, even to address sound concerns about asset or price inflation, would reduce demand in the economy and slow job creation.
Many liberal-leaning economists and activists believe that the Fed should tie a rate increase to more significant wage growth, which they say the job market has yet to generate. They argue that the Fed can control asset bubbles through regulation and the use of its bully pulpit, rather than by raising rates, which would depress employment.
The Fed said in a July 29 statement that it is waiting for prices to get closer to its target inflation rate of 2 percent before raising interest rates. But the central bank also said it is pleased by the health of the labor market, leading many to predict a September rate hike.
Trump’s praise for Volcker could also heighten suspicion that he lacks genuine conservative convictions. Volcker headed President Barack Obama’s Council on Jobs and Competitiveness, an outside panel of economic advisors, from 2009 to 2011.
The president has the power to influence Fed policy by nominating the powerful Fed chair, as well as members of the Federal Reserve Board of Governors, when their terms expire. Some analysts have criticized Obama for not investing more political capital in appointing Fed governors. Two of the seven governor spots remain vacant.
Trump suggested that he would make shaping Fed policy a priority if he were elected president, an office he claims to seek. He called the Federal Reserve a more important institution than the Treasury Department.
“The Federal Reserve — right now, in this world, the way we built it up — probably has more of an impact than almost any other position, other than the couple of biggies,” Trump said.
UPDATE: 7:30 p.m. — Democrat Martin O’Malley’s campaign forwarded the former Maryland governor’s response to a question about monetary policy for the labor union AFSCME’s candidate questionnaire. O’Malley didn’t share Trump’s concerns about an asset bubble, instead aligning himself with liberal-leaning economists and activists, who want the Fed to target wage growth. “With no signs of inflation, the Fed should not raise interest rates until wages are consistently rising at a healthy rate or inflation is immediately on the horizon,” O’Malley said.
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